Individual Tax Return Preparation
With the end of the year winding up it is important to get all your receipts, documents, and deductions in order so you can quickly complete your tax return once the next year rolls around. While it is important to pick the right accountant or CPA, there are some tips that each individual or small business owner can do in order to be better off come tax time.
It is important to remember that not all tax preparers are created equal. Your accountant may not be an actual CPA, even though he portrays himself to be. Most states have websites where you can check on the license of CPA's in order to find out if they are truly qualified. Also, some accounting firms use staff that are not licensed, but will have the partner just review the final sign-off before submitting it. While this is fine, staff members actually will do most of the work even though they may not be as qualified as the other members in the accounting firms.
Another point to consider is that it is best to avoid shopping by price. Just because a person is more expensive does not make them better. Sometimes the cheapest preparer may be best if they just work on the side or are a family friend. These types of tax pro's will often give you good tips in order to save some money.
The professionals say that most people often underestimate how much they give as charitable deductions. Things like buying girl scout cookies, donating to things at work, and giving clothing to Goodwill or the Salvation Army are all things that many people overlook as deductions. While they may be small individually, they can really add up at the end of the year. The goal should be to keep any evidence that you think could be a deduction and then let a tax pro decide if it will count.
Finally, I think a big misconception out there exists with receipts. Just because you do not have a receipt does not mean you cannot take the deduction. If you made a good faith donation you claim it even if you do not have documentation. Just be aware that if you are audited then you could lose anything you cannot prove. However, only about 1% of returns are audited each year and most of those include net incomes over $100,000 for individuals and much higher for businesses.
Often times people feel so overwhelmed with taxes that they are willing to pay a bit of money and just take it to a pro. Many times it is best to do this every few years anyway. Something to remember is that you can go back 3 tax years and amend your returns.
If the same mistake was made each year then this could be a large amount of money. Amended returns are more difficult so it is best to consult with a local Certified Public Accountant or someone who has adequate knowledge about amended returns. It is never too early to get started planning for the next year's tax strategy either.